Archive for the ‘cost’ Category

The head of OPEC says Russia and three other non-cartel members will take part in the oil producers’ summit next week in Oran, Algeria.

Chakib Khelil says Russia will send its deputy prime minister in charge of energy and its oil minister to Wednesday’s summit. The other guest countries invited by the 14-member cartel are Oman, Azerbaijan and Syria.

Khelil asserts that a final consensus has been reached by the Organization of Petroleum Exporting Countries to reduce oil output levels.

Crude oil prices jumped more than 10 percent Thursday after Russia said it was ready to join forces with OPEC and cut output.

Traders shrugged off a forecast of the first decline in oil demand in 25 years, instead anticipating joint efforts by the Organization of the Petroleum Exporting Countries and Russia to slash production in an effort to bolster prices.

Oil rigs extract petroleum in the Los Angeles area community of Culver City, California. Crude oil prices jumped more than 10 percent Thursday after Russia said it was ready to join forces with OPEC and cut output.(AFP/Getty Images/File/David McNew)

Light sweet crude for delivery in January closed at 47.98 dollars a barrel on the New York Mercantile Exchange, a gain of 4.46 dollars, or 10.25 percent, from Wednesday’s close.

In London, Brent North Sea crude for January jumped 4.99 dollars, or 11.77 percent, to settle at 47.39 dollars a barrel on the InterContinental Exchange.

AFP

After the benchmark New York contract closed Friday at a four-year low of 40.50 dollars, the market has increasingly focus on next week’s OPEC meeting in Oran, Algeria.

Russia is ready to join forces with OPEC to stem the plunge in crude prices and could even become part of the oil cartel if membership were in Moscow’s interests, Russia President Dmitry Medvedev said Thursday.

“Our partners, colleagues from the oil club (OPEC) are asking us to have a coordinated policy and whoever I meet, they are asking quite actively,” he said in remarks broadcast on state television.

Faced with falling oil prices, Russia is preparing to announce that it will work with OPEC in coordinating a reduction in output, the minister of energy said Wednesday.

Earlier this fall, a Russian official floated the idea of storing oil, rather than exporting it, to help the Organization of the Petroleum Exporting Countries stabilize prices, but this is the first time that the Kremlin has offered to reduce output.

By Andrew Kramer
The New York Times

Workers weld a first juncture of the Eastern Siberia-Pacific Ocean pipeline in Siberia’s Tynda-Skovorodino region, eastern Russia, October 2006. Russia said Wednesday it would announce proposals to reduce its oil output by December 17, signalling the energy superpower’s readiness to cooperate with OPEC to prop up falling crude prices.(AFP/File/Str)

World oil prices, which have been slumping around $40 a barrel, rose in response to the comments by the minister of energy, Sergei I. Shmatko, in early trading in New York Friday. Oil settled at $43.10 a barrel, up $1.03.

Mr. Shmatko said that by Dec. 17, the date of the next scheduled OPEC meeting, Russia will announce a plan to reduce the country’s oil production, the Interfax news agency reported. The minister offered no details of how this would be done, or how much oil might be taken off the market. Mr. Shmatko said Russia would also seek to persuade other non-OPEC producers to reduce output. A spokeswoman for the ministry declined to elaborate.

While formally at arms length, Russia and OPEC have flirted over some form of cooperation through the fall.

It is development sure to alarm consumers, who where just breathing a sigh of relief as American gasoline prices dipped below $2 a gallon. It is unclear, however, how much effect Russia’s increasingly anti-Western government might have on prices.

The Russian oil sector is a blend state-owned and private companies including a major joint venture with BP, the British oil giant, that would have to answer to stockholders for a reduction in revenue caused by a drop in output. Producing and transporting oil is costly in Russia and idling pipelines and fields could severely damage the industry.

Typically in oil price slumps, Russia and the Soviet Union before it has continued to pump oil freely, benefiting from the support for world oil prices provided by OPEC’s members, while not sharing in the financial loss of cutbacks. Norway and Mexico also benefit from OPEC while not belonging to it.

Other non-OPEC countries, meanwhile, have rejected any cooperation with OPEC. A spokesman for the ministry of petroleum and energy in Norway, the world’s fifth-largest oil exporter, said Wednesday that his country would not cooperate with the cartel, regardless of Russia’s decision, Bloomberg news reported.

In this fall’s steep drop off in oil prices, Saudi Arabia had been pressuring non-OPEC countries, particularly Russia, to cooperate. Russia pumps about 9.8 million barrels of oil a day, the second-greatest output in the world after the Saudis, and exports about seven million barrels of crude oil and refined products, mostly to Europe.

Global oil demand will collapse next year and commodities will not return to the highs they reached this summer in the foreseeable future, two authoritative reports said on Tuesday as they forecast a long and painful worldwide recession.

The stark conclusions came as the World Bank’s chief economist predicted that the world faced “the worst recession since the Great Depression”.

By Javier Blas in London and Krishna Guha
FT

A view of an oil refinery off the coast of Singapore.(Vivek Prakash/Reuters)

The US energy department said global oil demand will fall this year and next, marking the first two consecutive years’ decline in 30 years.

“The increasing likelihood of a prolonged global economic downturn continues to dominate market perceptions, putting downward pressure on oil prices,” it said, forecasting that demand would drop 50,000 barrels a day this year and a hefty 450,000 b/d in 2009. US oil demand will drop next year to the lowest level in 11 years.

Meanwhile, the World Bank’s Global Economic Prospects report said the commodities boom of the past five years – which drove up prices 130 per cent – had “come to an end”.